(Nov 20): The dollar had the best day since the end of September as traders boost wagers that the US Federal Reserve (Fed) will keep interest rates steady.
The Bloomberg Dollar Spot Index rose 0.5% on Wednesday, the most since Sept 25, closing the day at the highest level in more than two weeks. The Bureau of Labor Statistics (BLS) said the November employment report will be published on Dec 16, almost a week after the Fed meeting. Without that readout and October’s job report, the central bank is deprived of key data points that help it make policy decisions.
“The dollar is putting in an impressive rally today,” said Alex Cohen, a strategist at Bank of America. “I think there remains some upside asymmetries for the dollar, as the burden of proof remains for the data needing to justify a December cut.”
The BLS is set to publish the September non-farm payrolls report on Thursday. Government agencies are starting to roll out economic data after the longest federal government shutdown in history.
Traders are now nearly pricing out a December rate reduction. The BLS said on Wednesday it will not publish an October employment report, adding that it will incorporate those figures into the November results.
“The chances of a hold have gone up particularly given the lack of timely data,” said Aroop Chatterjee, a strategist at Wells Fargo in New York. “Unless September data shows unusual weakness, I think the majority will elect to keep rates on hold in December.”
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Bank of America’s Cohen said there were several factors lifting the dollar even before the BLS announcement, including UK fiscal concerns weighing on the British pound ahead of the country’s budget next week.
The British pound fell 0.7%, its fourth day of declines and longest losing streak since Oct 24. Meanwhile, the New Zealand dollar fell to the lowest since April, nearly erasing all of its gain for the year. The yen dropped as much as 1.1% to trade at 157.18 against the greenback, its weakest level since mid January.
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